Category Archives: Studies/Research

Casino Watch Focus has long reportedon the ongoing fight to regulate the addictive and gambling-esque gameplay mechanic known as loot boxes. Video games offer boxes that can be purchased for real money and they randomly provide in-game items. These items often have real world value and have certainly been sold as such. Clear links between this and slot machine gambling have been drawn and many are realizing what’s at steak. The issue became a main-stream topic when the Disney’s popular Start Wars franchise was licensed and used by video game publisher EA to make Battlefront II. The loot boxes were a critical component to advancing in the game and it was practically essential from children playing the game to buy these loot boxes to get equipment to be able to compete in the game. The situation was so bad one legislator called the game and Star Wars Themed online casino. After several individual dealings with loot box regulation, including the first actual ban,we now see the first coalition attempting to regulate this new form of gambling to children. Variety explains:

Fifteen gambling regulators from Europe, as well as Washington State Gambling Commission, signed an agreement to work together to address the “risks created by the blurring of lines between gaming and gambling,” according to Gambling Commission It also plans to tackle third-party websites that offer players the chance to gamble or sell in-game items.

Certain countries, like Belgium and the Netherlands, have already taken measures including officially declaring loot boxes as gambling. Those countries even had players unable to open loot boxes in “Counter-Strike: Global Offensive” (CS:GO) due to some players selling rare skins and other in-game items on third-party websites, sometimes for large sums of actual money.

Another measure was taken by popular games selling platform Steam, as Valve removed the ability to trade items in “CS:GO” and “Dota 2” on its platform to comply with gambling regulations in June. However, this will mark the first international combined effort against the concerns of gaming and gambling— which could mean a more intense effort than what individual states have taken.

Neil McArthur, chief executive and signatory of the UK’s Gambling Commission explained the intent behind the effort. “We have joined forces to call on video games companies to address the clear public concern around the risks gambling and some video games can pose to children,” McArthur said. “We encourage video games companies to work with their gambling regulators and take action now to address those concerns to make sure that consumers, and particularly children, are protected.” McArthur further noted that children could be “gambling with money intended for computer game products” using sites that allow users to bet real currency on in-game items. “We want parents to be aware of the risks and to talk to their children about how to stay safe online,” McArthur said.

Such efforts are even more critically important as more and more research is revealing the true cost and risk to our children. It was already reported that the loot box industry is expected to reach $50 billion dollars, but new research is demonstrating exactly what kind of negative effects that can have on children, and given the psychological similarities between gambling and these gaming mechanics, its no surprise the finding point towards a gateway to problem gambling. An online gaming publication reports:

An Australian committee has released the findings of an investigation on loot boxes in video games started earlier this year, reporting that loot boxes and problem gambling are linked and that the monetization practice comes with “a serious risk […] to cause gambling-related harm.”

The debate about loot boxes and their connection to gambling has been raging for quite some time at this point, but the Australian government’s investigation and findings back a growing number of lawmaking bodies and regulatory committees working to impose or encourage regulation of the practice.

In the case of this investigation, and according to information on the study shared by Lexology, researchers looked at a sample size of roughly 7,500 individuals and found “important links between loot box spending and problem gambling.”

The report notes that players with severe gambling problems were more likely to spend large sums on loot boxes in video games, and that its findings suggest that loot boxes can act as a gateway to problem gambling and that the monetization practice itself gives game companies “an unregulated way of exploiting gambling disorders amongst their customers.”

“These results support the position of academics who claim that loot boxes are psychologically akin to gambling,” reads a statement shared along with the findings, shortly after calling back to an earlier quote from the ESRB that likened loot boxes to baseball cards. “Spending large amounts of money on loot boxes was associated with problematic levels of spending on other forms of gambling. This is what one would expect if loot boxes psychologically constituted a form of gambling. It is not what one would expect if loot boxes were, instead, psychologically comparable to baseball cards.”

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Casino Watch Focus has reported on the ongoing revelation that video game publishers are pushing what many have called predatory gambling mechanics into recent video games. These loot boxes that are purchased by a gamer dispense in-game items by chance. The players don’t know what items they are actually purchasing and thus they chase after the change of getting the good loot much like a gambler chases after the right combination in a slot machine. What’s worse, publisher EA used these gambling boxes as the primary way to advance through their latest Star Wars video game, Battlefront 2. Naturally, this not only caught the eye of the media, but Disney themselves had to step in. Then governmental agencies started investigating and expressing concern for such psychologically manipulative mechanisms in video games that are available to children. Chris Lee, a Hawaiian legislature pulled no punches when he categorized the game and loot boxes as simply an Star Wars themed online casino aimed at taking kids money. Apple called for companies to disclose the odds of obtaining various loot in any games sold in there app store, but the industry as a whole decided not to regulate loot boxes through the ESRB system. Given the lack of sell governance, yet another state has pushed forward to investigate the issue. The Rolling Stone reports:

As the debate surrounding loot boxes and microtransactions as a form of gambling targeted at children continues, a new bill proposed in Washington is looking to force the game industry to regulate these mechanics, The News Tribune reports.

Washington State Senator Kevin Ranker introduced a bill this month asking state officials, as well as game developers, to determine once and for all if loot boxes and similar mechanics are specifically designed to prey on children.

“What the bill says is, ‘Industry, state: sit down to figure out the best way to regulate this,’” Ranker told the outlet. “It is unacceptable to be targeting our children with predatory gambling masked in a game with dancing bunnies or something.”

Despite the controversies, the game industry seems to be fully-committed to loot boxes and microtransactions. In a recent industry survey, the Game Developer’s Conference found one in 10 developers plan to implement the mechanics in their next game.

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Casino Watch Focus has reportedon the newly covered, gambling type video game items known as loot boxes. The boxes are purchasable in a video game and they provide random loot, or in game merchandise, much like a slot machine. This system of microtransactions came to light because EA pushed the envelope so far in their new Disney licensed Star Wars video game, that the only way to truly progress in the game or have the tools to win was to buy these loot boxes and gamble on the items you would get. The system is designed for the player to buy boxes, open them and chase after the best loot. Players pushed back, mainstream media picked up the issue, Disney had to get involve and make EA pull the gambling system from the game and legislators started looking into the issue. Hawaii legislators came out very strongly against the idea of exposing children to such psychologically manipulative, gambling type systems and called the game a Star Wars themed online casino. Its no surprise that a few weeks later and Hawaii legislators are now drafting legislation and working with other states and the industry itself to regulate the issue. Gaming publication Kotaku reports:

A Hawaii in which games with microtransactions are illegal for minors to purchase is one that state legislator Chris Lee is now hoping to realize. He says that prohibiting the sale of games with loot boxes is a “no-brainer,” and along with a dozen other politicians, he says, he’s thinking of how to put legal controls around video game microtransactions.

Over the course of a few months, Lee had been hearing from local teachers about kids who struggled with the temptation to spend beyond their means in game microtransactions. Lee cited one conversation about a kid who, he heard, had stolen their parents’ credit card to pay for their gaming habit. He says several families reached out about spending thousands of dollars on microtransactions.

“Gambling has been illegal especially for minors and young adults because they are psychologically vulnerable,” he told me, adding that kids “often don’t have the cognitive maturity to make appropriate decisions when exposed to these kinds of exploitative mechanisms.”

“There’s no transparency at the outset of what they’re getting into,” he said. “That’s something I think is a real concern.” Now, Lee is working to prevent the sale of games containing loot boxes to gamers under 21 in Hawaii. He also wants games to disclose up-front whether they have “gambling-based mechanics” and to publicize the odds of winning various items in loot boxes.

Apple Inc. certainly agrees with Lee that the odds of winning various items need to be disclosed to gamers. Falling in line with what other foreign governments like China Korea, Apple is now requiring game companies to publicize the odds. Venture Beats explains:

Apple quietly updated its rules for developers yesterday with a new version of its App Store Review Guidelines, and it now requires that developers disclose the odds of getting cool loot in the loot boxes for free-to-play games.

Loot boxes have become a big monetization opportunity in free-to-play games, but they’re also controversial, as Electronic Arts’ discovered with tying loot crate purchases to unlocking desirable characters like Darth Vader in Star Wars: Battlefront II. Gamers revolted, and EA backed off. Government officials also started to step in to say that loot crates should be regulated, as they can be perceived as ripping off consumers or even as gambling.

Apple is clearly trying to get ahead of any regulatory problem by requiring that developers now disclose proper information.

But those in the gaming industry don’t believe loot boxes are gambling. Not only have individual companies gone on record to say they are perfectly fine, the ESRB, the self-regulated industry body who labels games by age range, came out and said they didn’t believe they were gambling and they certainly haven’t proposed any regulatory measures to help protect consumers against the predatory nature of microtransactions. Those fighting against loot boxes aren’t simply looking at antidotal evidence either. The UK’s Gambling Commission just released a report with rather shocking evidence of children as young as 11 being preyed upon and possibly lead into gambling addiction. Dr. Mark Griffiths, Professor of Behavioral Addiction at Nottingham Trent University explains:

Last week, the Gambling Commission’s annual report found that children as young as 11 years of age are “skin gambling” online – paying money for the chance to win in-game virtual items. But this, while alarming, is just the tip of the iceberg.

It’s the terrifying phenomenon of “loot boxes” that are the most worrying and potentially dangerous aspect of e-gaming for children right now. “Loot boxes” are everywhere – they are otherwise known as crates, chests, cases, bundles, and card packs.

In FIFA Ultimate Team, for example, players can purchase gold, silver or bronze card packs, either using in-game currency or real money, in the hope of getting their hands on top talent to improve their teams. But there’s no guarantee of landing A-listers like Ronaldo or Messi – the cards won’t all be star players and will more likely be less valuable collectables.

The issue is that the buying of crates or loot boxes is a form of gambling because players, often children, are being asked to buy something of financial value that could end up being of lower financial value than the amount they paid.

The good thing is parents are now hearing about things like “skin gambling” and “loot boxes” but children also need to be educated about these activities as much as drinking, drugs or the risks of underage sex. Parents need to get to grips with what is going on in their children’s worlds.

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Casino Watch Focus has reported on the highly addictive principle of near misses and how this form of gambling forms strong addiction. Typically viewed in the context of regulated slot machines, the player pulls the lever and tries to line enough symbols up in a row to get a prize. Studies have indicated that when someone gets close but doesn’t win, what they call a near miss in the industry, the player will chase the win. A very similar phenomenon is now taking place in video games. The concept in the gaming world is known as a loot box. You pay a price to manufacture to by a box. Random items that a player would want to have in the game, say, a high powered weapon in a shooting game or a piece of defensive armor that models a coveted look and offers superior protection from other players, are generated when the loot box is opened. The key is that the items are random. Most players are looking for top end, often times called legendary gear. The odds of getting them aren’t too high and so a player tends to keep paying more and more money to open more and more loot boxes chasing after the win, or the best items in the game. This practice was identified very early as a form of gambling and a gaming mechanic that uses the same psychological techniques to addict players. The worst part, they are in games marketed toward children and no regulation exists. The highest level, state or federal laws, are completely none existent, so many in the community turned to the ESRB rating system to get these games classified as mature, so that young kids and teens aren’t the target of such gambling practices. As reported by Forbes, ESRB has erred in declining to view loot boxes as gambling, and social awareness is very much need to properly protect players:

Today, the Entertainment Software Rating Board, or ESRB, stated publicly that the hot new monetization trend in video games, loot boxes, don’t qualify as gambling. This is wrong on many levels. While it’s true that, unlike a slot machine, a loot box will always result in some form of a prize, that doesn’t change the fact that the simple act of opening loot boxes is incredibly similar to gambling, and taps into all the same parts of the brain.

“The player is basically working for reward by making a series of responses, but the rewards are delivered unpredictably,” Dr. Luke Clark, director at the Center for Gambling Research at the University of British Columbia, told PC Gamer recently “We know that the dopamine system, which is targeted by drugs of abuse, is also very interested in unpredictable rewards. Dopamine cells are most active when there is maximum uncertainty, and the dopamine system responds more to an uncertain reward than the same reward delivered on a predictable basis.”

Psychologists call this “variable rate reinforcement.” Essentially, the brain kicks into high gear when you’re opening a loot box or pulling the lever on a slot machine or opening a Christmas present because the outcome is uncertain. This is exciting and, for many people, addictive. When it comes to video games, the biggest concern is that children and adolescents will end up forming addictive behaviors early on.

At this point there are two issues/lines of thought at play. One is that the act of buying a loot box and opening it might not be technically gambling because you always get a prize. To this point, its pointed out above that the act of chasing loot boxes is exactly the same as gambling. More importantly though, some games do allow the players to sell or auction off the items received in exchange for real world money, items or game subscription, things with real world value. Eurogamer very specifically outlines the many ways in their recent article when they discuss both the US ESRB and European’s PEGI stance on loot boxes. So in that sense the player is putting real money into the game, opening the box and getting a price based on random chance not skill, and then cashing out the winnings, which is text book gambling. The Second line of thought is that regardless of whether or not this reaches the threashold for actual gambling that requires governmental oversight, it absolutely should get the ESRB’s attention and it should be disclosed to players and parents accordingly. Forbs continues:

“Look if you include these kind of mechanics in these games and you actually allow people to buy these packs for real money, these random blind packs and engage in what is essentially a form of gambling, then you should be jacking the rating of your game up to Mature.

“The fact that [Star Wars] /Battlefront II/ is going to be Teen rated and yet has an in-game real money gambling system blows my mind. How are they possibly getting away with that? Well, the answer is that the US government and legislation hasn’t caught up with it yet.”

OpenCritic co-founder and CEO Matthew Enthoven says that the ESRB’s response “kind of ducked the issue” calling it a semantic argument. “You can call it gambling, you can call it gaming addiction, you can call it whatever you want. The problem is still the same,” he tells me.

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Casino Watch Focus recently reportedthat gambling lobbyist finally admitted that casinos prey on customers. In a comment meant to say casinos hope more to prey on tourist, than the local residents, the well-understood relationship between casinos and gamblers was painted in a truthful light. Its clear the industry needs gamblers to make money, but it can be rather upsetting to learn just how they truly view them. Now it appears the online gambling community finds itself in a similar position. A recent study has shown that the online gambling industry has the tools to identify the most vulnerable of gamblers, yet they don’t help them, they pursue them. Consumer Affairs online reports:

Focusing on practices in the United Kingdom, the Guardian reports that the gambling industry often takes data from third-party companies to serve online gambling ads to low-income consumers or those who have struggled with gambling addiction. One digital marketer detailed his experience of working with one such betting company.

“Third-party data providers allowed us to target their email lists with precision. Lower-income users were among the most successfully targeted segments,” he said. “We could also combine segments, ie we could target users who are on less than £25k a year, own a credit card and have three kids, via these providers.”

Its upsetting to think the industry has no moral issue with targeting those most vulnerable, but to some its shocking. They promote the idea that gambling is an entertainment provided for people of the community to have a good time. They publicly preach messages of responsible gambling and offer 888 numbers and resources to help those in need, yet privately, they secretly target them as sustainable and easy money making prey. Consumer Affairs continues:

The practices of these gambling sites bring up some interesting ethical implications when it comes to digital marketing. One could argue that serving a targeted ad to get someone to buy a product they could be interested in is harmless, but can the same be said for serving an ad to someone who is desperate or struggled with gambling in the past? According to some consumers, the answer is a definite no. In the Guardian report, several people say that bookmakers are purposely taking advantage of its targeted audience to promote their business.

“It just reaffirms my belief that the betting industry has no moral compass and are capable of exploiting the vulnerable in order to obtain the last pound out of them,” said Carolyn Harris, Labor MP for Swansea East in the UK. “They are actively seeking out those who can least afford to be involved in gambling. I’m absolutely aghast that they use these hostile techniques in order to suck the life out of people. If we were to offer free cocaine to an addict, they’d find it very difficult to decline. The betting industry knows this and they are by token doing exactly the same thing.”

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Casino Watch Focus has reportedon the ongoing gambling expansion attempts in Florida. Many times over the years Florida voters have had a say in the expansion of gambling in Florida, but most of the time, Florida families are at the mercy of the legislature. If the Florida House and Senate agree to expand gambling due to special interest influence, citizens and families often lack recourse other that perhaps trying to elect new officials into office. Because of such strong pro-gambling interests, an initiative petitionis in the works to give the power back to the people. So what do the people of Florida think about gambling? Do they approve of the gambling expansion efforts at the State Capitol? Are they fine with all the lobbing dollars from special gambling interests flowing through the Florida Legislature? Or do they believe gambling expansion should be stopped, or even reduced? A new poll seeks answers and the results should open the eyes to legislators who are representing their constituents. Florida Politics online explains:

The vast majority of Florida voters — 84 percent— “want to reduce or hold the line on gambling” and 60 percent also “are less likely to support a candidate … that votes to expand gambling,” a new poll released Monday shows. The latest Mason-Dixon poll included questions on gambling, according to a news release from No Casinos, Florida’s anti-gambling expansion group.

“Tallahassee politicians need to get the message that only 8 percent of Florida voters want gambling expanded, and 84 percent want it left alone or reduced,” said John Sowinski, president of No Casinos. “It’s time to stop listening to gambling lobbyists and listen to the people.” In addition, he said most “Floridians don’t want their elected officials to expand gambling, because they know that more gambling hurts the quality of life for them and their families.”

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The Florida Lottery recently introduced five new scratch-off games, a move that likely will boost the lottery’s bottom line at the expense of its most vulnerable ticket buyers. Scratch-offs, which range from $1 to $25 a ticket, are most heavily played by the poor. No one is forcing them to fork over their money, of course. But as the lottery tailors its offerings to maximize scratch-off sales and markets games in low-income neighborhoods, Floridians would be right to question whose interest that really serves.

The names of the games are straightforward and promote a potential windfall: Maximum Money, Bonus Crossword, Double Deuces, Lucky Seven and Fast $100. All cost between $1 and $5, with a top prize of $250,000 for the $5 game. The new options mean the lottery now offers 83 scratch-off games, which account for 65 percent of ticket sales. Why do the poor play them more? For the instant gratification, experts say. People in poverty see the lottery as a chance to improve their lives. It rarely works out that way, but ticket sales soar nonetheless.

The South Florida /Sun /Sentinel recently analyzed lottery sales figures, marketing data and geographical information to discover who buys scratch-offs and what it costs them. The findings are disturbing. From 2010 to 2015, sales of scratch-offs rose three times faster in poor neighborhoods than in other areas, and it happened as the lottery directed more advertising to poor and minority areas, the /Sun /Sentinel found. Those parallel increases point to a win for the lottery’s marketing department but no one else.

Gambling critics refer to lotteries as a tax on the poor. But unlike taxes, lottery purchases aren’t compulsory. However, like taxes, they affect populations differently. The /Sun Sentinel/ found that people in high-poverty areas spent an average of $385 in 2015 on scratch-off tickets. In better-off areas, the average was $245. Those figures validate the argument that lotteries are regressive and even harmful.

Where that harm might be mitigated — in increased money for education — inequality persists. Florida’s Bright Futures scholarships, funded with lottery money, are awarded to students who score in the top tier on the SAT or ACT. The high standards mean mostly middle- and upper-class students earn the scholarships, not poor and minority kids. That gap grew wider last year when the state raised the bar even more on Bright Futures in order to rein in costs.

These are salad days for the Florida Lottery, which is enjoying its highest sales ever — $532 million in July alone. Profits were up 17 percent compared with July 2015. But too much of the windfall is coming out of the pockets of low-income Floridians who are being lured to spend money they can’t afford to lose on a long-shot bet.

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This is a news blog for Casino Watch staff, volunteers, scholars and policy makers. The views expressed by each contributor to this blog are those of that contributor alone, and do not necessarily represent the views of Casino Watch.